VC101 – Venture Capital for Beginners

Osage Partners recently visited to provide our inventors with a primer on venture capital. Kristin Leute and Stephanie Stehman from Osage provided an interesting talk and discussion after. A great crowd showed up at Whitehead Auditorium for the talk but we know that not everyone could make it, so we wanted to provide some takeaways from the talk that might be useful for those looking into getting their startup funded by venture capital firms.

Venture Capital GraphicVenture capital (VC) might sound scary to some. Entrepreneurs often worry that VCs want control over their company or will try to usurp their authority. Venture capitalists do have specific desires in exchange for funding but they rarely want control of the company they fund. They will sometimes step in if the company is not doing well because they are financially accountable, but this control is not the goal. Venture capitalists also want liquidation preference so that they have rights to get money before others and they usually want some stock or ownership of the company. VC funding will dilute the founders’ ownership of the company but that’s not a bad thing! Some dilution is good, but too much dilution can be bad.

When examining university startups, VC firms look for a company with strong science or technology with IP coverage, a large target market, impressive management, and a niche for an attractive segment of the industry. Unfortunately, most startups are not applicable for VC funding because the order of magnitude for the return on investment is just not high enough.

The good news, however, is that there are a number of other funding sources that university startups can go after to build their company in order to be attractive for VC funding. For example, grants, friends and family, venture philanthropy, angels and accelerators, and crowdfunding are all sources for additional funding before (and even after) obtaining VC funding.

At Emory’s OTT we’re here to help you find these different funding sources for your Emory invention and Emory startup, no matter where it is in its life cycle. Feel free to reach out to Kevin Lei (klei [at] emory [dot] edu) to start a conversation!